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Bank of England Inquires About Banks’ Readiness for Negative Rates

The Bank of England asked banks on Oct. 12 how ready they were for zero or negative interest rates. It considered last month how to take interest rates below zero, if needed.

A negative interest rate would encourage banks to lend out money rather than leave it at Britain’s central bank. A negative interest rate could also theoretically result in charging savers for holding deposits in their bank accounts. However, the need to attract deposits might prevent banks from passing on all their costs to customers.

Other central banks, including the European Central Bank and the Bank of Japan, have already reduced rates to negative. The BOE said in September it was exploring how a similar policy might affect Britain.

Bank of England Letter

The Bank of England issued a letter to many o…

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